RF's Financial News

Sunday, January 29, 2017

Over the years, I’ve spoken
many times about how our Central Banksters are enormous buyers of stocks.I’ve mentioned how the Bank of Japan owns
almost 75% of Japan’s ETFs.I’ve spoken about
the Swiss National Bank owning billions of dollars’ worth of Apple (AAPL),
Microsoft (MSFT), and Exxon Mobil (XOM). And I’ve talked about how our
companies are borrowing money at virtually zero interest rates, and using those
same funds to buy back their own shares of stock.Just this week, Zero Hedge ran a story on how
Central Banks plan on buying even MORE stocks – which begs the question: Can
stocks ever really go DOWN?Given
Central Banks can both print money out of thin air, and buy stock: How can you
ever take a beating?

The answer comes from
‘where’ the money came from.In normal
times, you were paid a commensurate wage for your work.So, the amount of money that was in
circulation at any given time was directly proportional to the number of goods
and services that existed in the world.This kept production in line with demand, and it also kept a lid on
pricing.But when the Central Banksters
started creating billions and buying stocks, the entire process of consumption
being linked to creation and demand was thrown out the window.And what was put in its place was the
absolute definition of inflation.

Many people define inflation
as "rising prices", but in technical terms that’s simply the
result.The true definition of inflation
is: "an increase in the money supply".I personally can’t think of a better example
of an ever-increasing money supply than our Central Banksters creating money
out of thin air, and using it to instantly buy stocks.They are clearly doing it without any productive
input to the global economic machinery.

Schemes like this often work
in the short term, but go awry because some event causes an increase in the
velocity of money and that causes prices to spiral higher.The velocity of money is simply how fast a dollar
changes hands.In a hot economy, the
velocity is high because everyone is out spending all that they can get.In a sluggish economy, monetary velocity
slows as savings increase.

Historically, printing money
has never worked.While the injection of
money during periods of economic contraction has (at times) been able to keep
the wheels from coming off an economy – continued injections lead to runaway
inflation. Inflation is starting to become an issue, and will become a
larger one over the next several months and years.

A couple thoughts to
consider – (courtesy of SF):

-4th
Quarter GDP came in at 1.9% on Friday – well below the estimates.

-Neil deGrasse
Tyson said: “Congress and Donald Trump are considering cutting PBS support
(0.012% of the budget) to help balance the Federal budget.This is like deleting your text files to make
more room on your 500Gig hard drive.”

-"It's
cheaper to buy a $35,000 robotic arm than it is to hire an inefficient employee
– making $15 an hour bagging French fries," … former McDonald’s CEO Ed
Rensi.

-The South China
Morning Post reported that Foxconn (a supplier to both Apple and Samsung) has
recently REDUCED total employment by
60,000 people with the introduction of robots.

-More than 67% of
U.S. assets are controlled by individuals over 50 years old.Bankers are viewing the ‘Reverse Mortgage’ as
the final opportunity to lend to the 50+ generation.In that vein, Fifth Third Bank ($141B out of
Ohio) will acquire Retirement Corporation of America (RCA) – a registered
investment adviser providing retirement education and planning nationwide.

-We need to
revise our educational system:

oUniversity
enrollment has increased 20% over
the past decade.

oUniversity costs
for tuition, fees, room, and board have risen 34% over the past 10 yrs.

oOver the past
decade, University endowments have increased over 80%.

oOver the past 10
years, our Universities are spending more money on building monuments, than
they are on improving the teacher to student ratio.

oWith our universities having larger endowments than most of the ETFs out
there, I think it’s time to refocus our educational system around the educator
rather than around the endowment or the physical facility.

The Markets:

Animal spirits are alive and
well.For the first time in my life, I'm
watching a man go to Washington, and totally change the entrenched political
decision-making.In the past, a
President would over-promise, under-deliver, and in many cases, do a 180 degree
turn against what they said on the campaign trail. Trump is definitely
NOT playing that game.

But even with all of the hope, the reality of the moment is that things aren't
very good, and the market is front running all the good things that are
potentially coming. This week the DOW made it over 20K, and held above
that level for 3 days.However, it came
with anomalies that caused me to raise an eyebrow.According
to the latest Bank of America data, last week U.S. equities saw $6.3B in
outflows.This was the largest weekly
redemption from U.S. mutual funds and ETFs in four months.So, at the very time that the DOW created
all-time highs, $6.3B was pulled OUT of the markets.Also, the day we hit 20K, trading volume on
the SPY (the largest ETF) was only 84m shares. The following day volume
on the SPY went down to 60m shares, and on Friday it hit 59m shares.In other words, there has been no volume
confirmation of this move.

So, $6.3B is leaving
equities and being deployed into bonds, and we have a clean break-out to
all-time historic highs on relatively low volume.These are NOT the sorts of actions that I
would have expected last week.But then
again, I'm using analysis based on some fundamental premises, and fundamentals
went away ten years ago.Who cares if
pension funds and insurance companies are pulling out – just as long as the
Swiss National Bank keeps buying the DOW stocks and driving them higher.I still think that we get this last run
higher, pull in more sideline sitters, and then roll over into a 10%
correction.

Tips:

Over the past several weeks,
I laid out a specific SPX trading strategy that I was doing.I started by selling some weekly Iron Condors
(IC) – expiring January 20th – between 2260 / 2265 and 2290 / 2295 –
for between $230 and $245 per IC.I was
hoping to show some of the modifications that I had to do, but the SPX acted
remarkably calm – ending the week @ 2271.Therefore, I pocketed the entire $245 per contract.Last week I sold a similar set of weekly SPX
Iron Condors – expiring January 27th – between 2245 / 2250 and 2280
/ 2285 for $250 per IC.The SPX went to
2295:

-BUT we had to
roll out the 2280 / 2285 portion to the corresponding Feb 3rd delta
30 options centered around the 2310 / 2315 strikes for $1.85.

-That $1.85 came
directly out of the previous SPX’s $2.45 profit – reducing our profit on the
Jan 27th transaction to 60 cents.

-We are now
holding the 2310 / 2315 Call Credit Spread @ $1.85 / and will sell the 2275 /
2280 Put Credit Spread against it on Monday – for an additional credit of
$1.40.

I will continue this example
through this week, in hopes that it should give you enough to do this on your
own moving forward.

I’m attending a financial
conference in Rocky Mount, NC this weekend – and will hopefully incorporate
those thoughts in my upcoming trades and recommendations.

To follow me on Twitter.com
and on StockTwits.com to get my
daily thoughts and trades – my handle is: taylorpamm.

Please be safe out there!

Disclaimer:

Expressed thoughts proffered
within the BARRONS REPORT, a Private and free weekly economic newsletter, are
those of noted entrepreneur, professor and author, R.F. Culbertson,
contributing sources and those he interviews. You can learn more and
get your free subscription by visiting: <http://rfcfinancialnews.blogspot.com>.

Views expressed are provided
for information purposes only and should not be construed in any way as an
offer, an endorsement, or inducement to invest and is not in any way a
testimony of, or associated with Mr. Culbertson's other firms or
associations. Mr. Culbertson and related parties are not registered
and licensed brokers. This message may contain information that is
confidential or privileged and is intended only for the individual or entity
named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is
not indicative of future performance. Please make sure to review important
disclosures at the end of each article.

Note: Joining BARRONS REPORT
is not an offering for any investment. It represents only the opinions of RF
Culbertson and Associates.

PAST RESULTS ARE NOT
INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY
FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE
INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS
INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT
PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME
REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY
CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE
INVESTMENT MANAGER.

Alternative investment
performance can be volatile. An investor could lose all or a substantial amount
of his or her investment. Often, alternative investment fund and account
managers have total trading authority over their funds or accounts; the use of
a single advisor applying generally similar trading programs could mean lack of
diversification and, consequently, higher risk. There is often no secondary
market for an investor's interest in alternative investments, and none is
expected to develop.

All material presented
herein is believed to be reliable but we cannot attest to its accuracy.
Opinions expressed in these reports may change without prior notice. Culbertson
and/or the staff may or may not have investments in any funds cited above.

Sunday, January 22, 2017

It’s often said that
entrepreneurs control the planet.That
statement was fully on display during the World Economic Forum in Davos,
Switzerland this past week.There, we
found out that the following 8 entrepreneurs control more than HALF of the
world’s wealth:

-Bill Gates –
U.S. – founder of Microsoft (MSFT),

-Amancio Ortega –
Spain – founder of Inditex Zara (ITX),

-Warren Buffet –
U.S. – founder of Berkshire Hathaway (BRK.A)

-Carlos Slim Helu
– Mexico – founder of Grupo Carso,

-Jeff Bezos –
U.S. – founder of Amazon (AMZN),

-Mark Zuckerberg
– U.S. – founder of Facebook (FB),

-Larry Ellison –
U.S. – founder of Oracle (ORCL), and

-Michael
Bloomberg – U.S. – founder of Bloomberg LP.

It is my contention that our
government has yet to figure out how to foster and grow entrepreneurship.Since the Obama administration took office,
new corporate formation has been at all-time low levels.I believe that entrepreneurship in the U.S.
grows ‘in spite’ of our government’s efforts.Ms. Maria Contreras-Sweet (outgoing head of the Small Business
Administration (SBA)) proved my point this week with her exit email.And thanks to MJP – who was nice enough to
provide his facts, wit, and sarcasm to her email below.

Maria:“Small businesses are the cornerstone of the
American Dream. They give us the freedom to chart our own paths and live to our
fullest potential. They are the engines of American job creation,
creating the majority of our new jobs, and are the wellspring of American
innovation.”

MJP:
“The above is ONLY true if you count a 'new job' as one person deciding to
start a side business.Otherwise, you
have squelched entrepreneurship.The
Bureau of Labor Statistics (BLS) tells us that 85% of ‘new businesses’ under
the Obama administration were one person businesses without a payroll – and 50%
of those are gone within one year.”

Maria: “Small business
owners shape the character of our Main Streets and are the pillars of our
communities.Under President Obama, we
at the U.S. Small Business Administration have been fighting to ensure that
America’s entrepreneurs receive the support they need to succeed with
unprecedented access to capital, counseling, and record-level federal
contracting opportunities.”

MJP:“Unfortunately, all of that access to capital and counseling was artificially
enhanced with taxpayer money.You should
ask: Why would any entrepreneur ever agree to take swimming lessons from a
government who’s afraid of the water?Everything about the Federal Government’s mantra of ‘over-spend to
under-produce’ flies in the face of entrepreneurship – and shows their true
lack of understanding.”

Maria:“The SBA strives to be smart, bold and
accessible: embracing smart systems and modern technology, promoting bold steps
into new markets, and ensuring entrepreneurship is accessible to Americans of
all backgrounds.”

MJP: “Unfortunately with entrepreneurship there is no
need to 'promote' new markets.The goal
of the entrepreneur is to FIND the customers, or otherwise admit that there
isn’t a viable market and move-on.I
appreciate our government trying to make heroes out of victim groups – but
realize that entrepreneurship and the free markets are blind to: race, color,
creed, and sex.”

Maria:“Looking back on the economic crisis the
nation faced eight years ago, I am awed by the strides made by this
Administration and proud of the role that the SBA team has played in supporting
that progress.America’s small
businesses were hit hard by the Great Recession, and we responded with a
comprehensive effort to encourage entrepreneurship and bolster job creation.”

MJP: “Honestly, our government created dozens of
programs to support startups that would have (should have) never survived
without your life support.The BLS
proves that less than 10% of your efforts were successful, and that you and the
Obama Administration established a new, all-time LOW for new company creation.”

Maria: “When private sector
small business lending faltered, the SBA stepped into the breach, bridging the
gaps and reaching record levels of lending support to America’s
entrepreneurs.When small firms needed
increased earnings to thrive and grow, we worked with small businesses to help them
win record-shattering levels of contracts.”

MJP: “Lending to people with weak business plans and
as a lender of last resort is: fake, unsustainable, a horrible idea, and a
complete waste of taxpayers' money.There is no art or science that rewards spending a lot of resources
badly.”

Maria:“When our heroic veterans needed help
entering a difficult economy, we created new training programs – bringing
entrepreneurial skills to more than 50,000 members of our military and their
spouses.When underserved communities
across the nation were struggling to rebuild, we launched a series of
initiatives to boost entrepreneurship, lending, investment, and innovation.”

MJP: “This all sounds good, but having your efforts
result in the lowest level of entrepreneurial activity in HISTORY is nothing to
be proud of.Rather than putting money
where people aren’t – maybe try investing where customers actually are?I don’t think any successful entrepreneur
made a living from selling to customers that could not pay in areas that
customers did not frequent.”

Maria: “When President Obama took office, American
families were losing their livelihoods and their homes at staggering rates.
Thanks to his leadership, the next Administration will inherit a small business
economy that is strong and robust.”

MJP: “As a result of being crushed by regulations and
by the cost of ObamaCare, the small business community voted against you /
Hillary.Every year entrepreneurs ask
for two things: reduced taxes and early stage tax credits.Entrepreneurs (without a nanny state) can
figure everything else out, or they close-up and move-on.”

As I heard President Trump
(in his inaugural address) talk of taking the power from Washington and giving
it back to the people – I was reminded of a similar inaugural address given
over 50 years ago by a rebellious John F. Kennedy: “For too long, a small
group in our nation's Capital have reaped the rewards of government while the
people have borne the cost.Washington
flourished, but the people did not share in its wealth.Politicians prospered - but the jobs left and
the factories closed.The establishment
protected itself but not the citizens of our country.Their victories have not been your victories;
their triumphs have not been your triumphs; and while they celebrated in our
nation's capital, there was little to celebrate for struggling families all
across our land.”JFK (when elected) was just as controversial
a figure as Donald Trump.We gave JFK a
chance, and we made it work.

The Market:

“No one wins in a trade war.”… Chinese President Xi

72% of U.S. companies
believe that Donald Trump’s presidency will impact their business operations in
the following top 3 areas:

-Barriers to
Global Trade:Even President Xi admits,
with the U.S. being the largest consumer of goods on the planet (by a long shot)
– it gives the U.S. the upper hand at leveling the playing field.However, instituting a ‘Border Adjustment
Tax’ could mean real trouble for global
automakers, along with Nike (NKE), Dollar Tree (DLTR), and Restoration Hardware
(RH).

In a trade war, Goldman’s
top 10 impacted companies would be:

1. Nvidia (NVDA),

2. Apple (AAPL),

3. Broadcom (AVGO),

4. International Business Machines (IBM),

5. 3M (MMM),

6. Nike (NKE),

7. Skyworks Solutions (SWKS),

8. Wynn Resorts (WYNN),

9. United Technologies (UTX), and

10. Yum China Holdings (YUMC).

I continue to wonder if the
market’s sag for the past month was just a digestion of the giant
(post-election) move, or whether it’s signaling the beginning of a fade to
correction?The market responded
positively to Inauguration Day on Friday, as we ended the day up almost 100
points on the DOW and up 7 in the S&P.But all we did was place the S&P dead center in the middle of the
range it's been in since December 13th. And we simply moved the DOW from
slightly under the range – to back into the lower side of the range.

Is the DOW ever going to
snag the golden ring of DOW 20K, or do we continue in this sideways range
box until ultimately we begin a fading type of correction?I've been leaning towards seeing that last
hurrah run-up, but it's not looking all that healthy.As you see by the graph below, there isn’t
all that much ‘cash on the sidelines’ to invest in the market.In fact, you could potentially say that anyone
who wanted to be invested in this market – IS invested in this market.If that is the case, then sellers should
overtake buyers in the coming weeks and return this market back into its moving
averages or lower.

I think we only have this
coming week to get us back near the highs, or we could see this rally exhaust
itself and begin to roll over.Let’s see
if Friday's gains were the start of the final attack on 20K, or simply a
desperate attempt to keep the wheels from coming off.We'll know soon enough.

TIPS:

There is a tug-of-war going
on between the precious metals and the more ‘risk-on’ assets.But before we go down that road, last week I
highlighted an Iron Condor strategy that I use strictly on the indices (SPX,
NDX, RUT, DIA, SPY, QQQ and IWM).In
low-volatility markets (such as this one), I sell Iron Condors with their inner
strike ‘closer to the money’ such as a delta-30 and their outer strike in the
upper delta-20s. That gives me more of a 1:1 risk to reward relationship.That way if one side of the trade goes
‘south’, I have enough money on the other side of the trade to either roll it
or buy it back – and still remain profitable.I laid out a specific SPX trade that I was doing: selling some weekly
Iron Condors (IC) – expiring January 20th – between 2260 / 2265 and
2290 / 2295 – for between $230 and $245 per IC.I was hoping to show some of the modifications that I had to do, but the
SPX acted remarkably calm – ending the week @ 2271.Therefore, I pocketed the entire $245 per
contract.In hopes of demonstrating any
required adjustments, I again sold a similar set of weekly SPX Iron Condors –
expiring January 27th – between 2245 / 2250 and 2280 / 2285 for $250
per IC.Just like this past week, in
next week’s newsletter I will highlight any modifications I do to this trade in
order to better show you how to create a weekly income stream.

Finally, gold jumped over
$1,200/oz. and silver over $17/oz. this past week.The action surrounding the Trump inauguration
could be signaling a move to $1255 and $18 respectively.Here are 5 elements that could send the
precious metals soaring:

1.Trump declares his intention to name China as a
currency manipulator. Watch: FXI, FXP,
and ASHR.

2.Trump declares his intention to abandon the so-called
‘One-China’ policy.

3.Trump states an intention to declare artificial
islands built by China in the South China Sea as illegal.

4.Trump makes more statements that are seen as encouraging
European Union (EU) member countries to leave the trade pact. Watch: EWG, FEZ, HEDJ, VGK, and FXE.

5.And Trump provides support for quickly doing a trade treaty
with the United Kingdom – adding more fuel to the UK’s hard exit from the
EU. Watch: EWU and FXB.

To follow me on Twitter.com
and on StockTwits.com to get my
daily thoughts and trades – my handle is: taylorpamm.

Please be safe out there!

Disclaimer:

Expressed thoughts proffered
within the BARRONS REPORT, a Private and free weekly economic newsletter, are
those of noted entrepreneur, professor and author, R.F. Culbertson,
contributing sources and those he interviews. You can learn more and
get your free subscription by visiting: <http://rfcfinancialnews.blogspot.com>.

Views expressed are provided
for information purposes only and should not be construed in any way as an
offer, an endorsement, or inducement to invest and is not in any way a
testimony of, or associated with Mr. Culbertson's other firms or
associations. Mr. Culbertson and related parties are not registered
and licensed brokers. This message may contain information that is
confidential or privileged and is intended only for the individual or entity
named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is
not indicative of future performance. Please make sure to review important
disclosures at the end of each article.

Note: Joining BARRONS REPORT
is not an offering for any investment. It represents only the opinions of RF
Culbertson and Associates.

PAST RESULTS ARE NOT
INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY
FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE
INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS
INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT
PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME
REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY
CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE
INVESTMENT MANAGER.

Alternative investment
performance can be volatile. An investor could lose all or a substantial amount
of his or her investment. Often, alternative investment fund and account
managers have total trading authority over their funds or accounts; the use of
a single advisor applying generally similar trading programs could mean lack of
diversification and, consequently, higher risk. There is often no secondary
market for an investor's interest in alternative investments, and none is
expected to develop.

All material presented
herein is believed to be reliable but we cannot attest to its accuracy.
Opinions expressed in these reports may change without prior notice. Culbertson
and/or the staff may or may not have investments in any funds cited above.

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